Journalists
Ian Campbell's taught English at the Université de Poitiers before studying economics. He was Chief Economist, Emerging Markets at ABN AMRO Bank, Head of Latin American Research at BancBoston Securities and Regional Director, Latin America at the Economist Intelligence Unit. Since becoming a journalist in 2000 he has written for The Washington Post , The Times, The Independent, The Economist, The Globe and Mail, The Chicago Tribune, The New Statesman and other publications. From 2000 to 2003 he was Economics Correspondent for the UPI press agency. He has recently returned to the UK, where he is writing a book on rural Mexico.
The central bank’s Monetary Policy Committee was split earlier this month. The chief economist worries about bubbly asset prices. But for other members, post-bubble deflation is the main fear. Japan ’s weak growth and spiralling debt shows the danger.
After the worst recession since the beginning of the Cold War, it’s easy to be gloomy. But the end of that rivalry 20 years ago has made the world much better. The reign of finance was temporary. The benefits – in cooperation and prosperity – will endure.
The Bank of England’s decision to print another £25bn smacks of compromise. Some policymakers may have wanted more. Others may have feared that quantitative easing has already gone too far. The money printing will have to stop one day. For now, the UK continues on its risky road.
Milton Friedman’s work on the 1929 stock-market crash has guided the fight against a repeat of the Great Depression that followed. The economist wouldn’t have fully approved of today's fiscal policies. But he taught us enough to prevent a second depression, says Ian Campbell.
Ultra-low US interest rates are pushing the dollar down – and commodities and some emerging economy currencies up. Not the Chinese renminbi, though. That’s fixed. So the others have to take the strain. Brazil has tried to respond. But these are the ingredients of another crisis.
Sterling enjoyed a sharp rally last week amid an apparent short squeeze. But the currency’s ultimate fate will be determined by the UK’s still frail fundamentals. Further weakness seems in store, as the UK seeks a rebalancing which mega-stimulus may have delayed.
The eurozone is suffering a much bigger contraction than the US. One reason is the weak dollar. The cheap currency helps US exporters and makes imported goods pricier. It’s the opposite for the expensive euro. The eurozone’s suffering looks set to persist.
The eurozone has emerged from recession, but largely thanks to German exports. The region has contracted twice as much as the US and still appears reliant on far-away consumers to fuel its growth. Germany’s finance minister is probably right to see tax cuts as a way forward.
Mervyn King may think otherwise. The UK central bank’s governor implied that lots of newly created money will make the “long, hard road” of recovery much softer. That’s wrong. Money printing may have averted deflation, but it can’t make growth soar without bringing inflation.
The UK central bank should extend its quantitative-easing experiment this week. While the economy may grow in Q4, the outlook for 2010 is poor. With mega fiscal stimulus needing to be reversed, loose money must seek to keep the UK from a longer recession. Ian Campbell explains.
The new government is thinking of slashing taxes despite a worsening budgetary position. The approach is right. The Germans need to spend, as US consumers aren’t. The way to make the tax cuts affordable is to trim big government.
The euro at $1.50 – the highest level in 2009 – reflects dollar weakness, not eurozone strength. A strong currency adds to the region’s strains. The ECB may try to talk the euro down. But real relief can only come from across the Atlantic, whenever the Fed hints at rate rises.
Investors expect interest rates to remain unchanged for a long time. But both growth and inflation are about to turn positive. The US Fed has good reason not to raise rates too fast too soon. But tightening should be on the agenda, and many markets face upheaval when it comes.
A failed bond auction and a government struggling with budget cuts have again caused smoke to rise in Latvia. The Baltic state’s real problem is a fixed – and hugely overvalued – exchange rate. Ten months after its first rescue attempt, the IMF should bite the devaluation bullet.